Tata Trusts to invest in social sector startups

“We have been incubating and accelerating startups through FISE, working in the social sector in areas such as healthcare, sanitation, etc, for over a year now, but now there’s a need to scale them up,” said Manoj Kumar, head – innovations, Tata Trusts.Surabhi Agarwal | ET Bureau | August 17, 2017, 09:11 IST

Tata Trusts, philanthropic arm of Tata group, is looking to raise funds to invest in social sector startups in the next few months. A top executive of the agency told ET that after incubating and investing in 15 startups at the seed level in the past year of its existence, the company is now looking to raise $30 million for social sector startups.

“We have been incubating and accelerating startups through the Foundation for Innovation and Social Entrepreneurship (FISE), working in the social sector in areas such as healthcare, sanitation, water and agriculture for over a year now, but now there’s a need to scale them up,” said Manoj Kumar, head – innovations, Tata Trusts, adding that Tata Trusts being a philanthropic organization can only provide grants to various entities and therefore, there’s a need to raise funds from sources other than Tata Trusts.

“We are planning to reach out to philanthropic organisations and individuals across the world to contribute to the fund,” said Kumar. The organisation has already got the approval from the Securities & Exchange Board of India (Sebi) for a Category One Alternative Investment Fund (AIF).

He said that the organisation through its Social Alpha model is trying to provide an end-to-end solution by providing deep domain research and innovation facility through Tata Trusts, the workable solutions are then provided seed capital through the FISE and are tested in the market for affordability and accessibility through its huge network of NGOs. With the fund, it wants to now complete the chain by providing scale to the start-ups.

So far, it has provided seed capital in companies such as Harisaru Dala, which works for creating sustainable livelihoods for waste pickers, Habba a social ecommerce platform designed to maximise financial returns for low-income artisans and weavers across India, and Meghshala which has created a community of teachers along with Rang De and Sabziwala among others.

“Social sector problems are only being solved by NGOs; if you want to build a scalable model you have to build it around entrepreneurial model,” said Kumar who is also CEO and co-founder of Social Alpha.

Kumar said that very few investors currently want to invest in social sector with most skewed towards Internet driven companies. “Even those who engage in impact investing are largely interested in services and rarely in building sustainable products,” he said.

Tata Trusts, which invests around $40 million a year in R&D, has partnered with over 30 educational institutions, which includes the likes of MIT and IIT which have joint research facilities with the Tata Group.

FISE, on the other hand, has an allocation of about Rs 55 crore over the next three years from Tata Trusts out of which it has already spent Rs 10 crore in the first year of its existence. A part of it has gone into investing in 15 startups with the average ticket size of Rs Rs 50 lakh.

“With the fund, we hope to be able to invest in 15-20 companies in the next two years, and hopefully raise a larger fund next year,” said Kumar. Fund will have higher investment appetite, ranging from $ 0.5 million to $ 1.5 million per company in equity investments, he said.